Will FM grant infrastructure status for Indian real estate in Budget?

Budget 2024: All eyes on Centre's last fiscal roadmap before parliamentary polls

Real estate developers are hoping that the interim union budget of 2024 will deliver on their long-standing demand of granting infrastructure status to the sector, a move that will usher in more transparency in the sector and provide developers better access to more sources of capital at cheaper rates and bring in more investments into the sector.

Currently, the size of the Indian real estate sector is estimated at $0.33 trillion in 2024 and is expected to reach $1.04 trillion by 2029, growing at a CAGR of 25.60 percent during the forecast period (2024-2029), according to a report by Mordor Intelligence.

"However, most of the sector continues to remain unorganized, especially the construction sector. Granting infrastructure status has been a long-standing demand from experts and also realtors for several years," said Pankaj Kapoor, Managing Director, Liases Foras, a real estate research company.

He added that previously the central government had already granted a similar status to the affordable housing segment, thus bringing in a lot of transparency.

In February 2018, the central government granted infrastructure status to affordable housing to avail the associated benefits such as lower borrowing rates, tax concessions and increased flow of foreign and private capital.

"Acknowledging the pivotal role real estate plays in the nation's economic growth, our foremost expectation is the long-overdue grant of infrastructure status to the sector. This recognition will not only catalyse investments but also streamline regulations, fostering a more conducive environment for sustainable development,” Pradeep Aggarwal, founder and chairman of Gurugram-based developer Signature Global (India) Ltd said.

Experts say that granting infrastructure status will help organise the sector and bring transparency --- especially in terms of funding.

Kapoor added that several aspects like raising capital, especially from offshore locations, and also the borrowing will have more transparency in the new status --- unlike today.

G Hari Babu, National president of the National Real Estate Development Council (NAREDCO) said that infrastructure status for the sector would help in getting easy and low-cost loans from banks.

"Further, it would also open up more avenues for finance for the segment, including equity investors. As finance and higher interest rates remain key issues for the sector, this would turn out to be a very beneficial move, if implemented, as it would significantly bring down the overall cost of housing," he added.

S K Narvar, group chairman of the Noida-based Trident Realty added that if real estate is given industry status, developers will have easier access to loans with lower interest rates and easy financing options from institutional investors.

Among other benefits, infrastructure status also helps in lowering a few key levies, including electrical tariffs. This status and the eventual relaxations would play a significant role in the growth of the sector as high interest rates still continue and global volatility refuses to die down amid geopolitical tensions, which may keep inte rates elevated.